The short-term and long-term options for borrowing for your business needs.
It is a fact of business life that at some stage, whether starting out or growing and scaling, you will need to access capital for your business.
In Ireland, there are three main types of finance:
Debt: The business borrows from an external source to meet its business needs (i.e. a business loan)
Equity: A private investor provides a cash injection in return for part of the ownership of the business to support its growth
Cash: A business can also finance its growth through cash from the business owner, family or friends, or grants from government agencies
To borrow from a bank is a form of debt finance. The golden rule is to match the type of finance (short term-or long-term) to the intended business need.
Short term finance includes overdrafts, invoice discounting1 and business credit cards.
Long-term finance includes asset finance2, term loans and finance under the Credit Guarantee Scheme3. if your business has been impacted by the Covid-19 pandemic.
Short-term finance options for businesses
Overdrafts:
These are a short-term permission by a bank to allow a business to issue payments and make withdrawals on the current account up to a specified amount. Interest is charged on a daily basis on the amount of the overdraft used. There will also be quarterly fees and an annual facility fee of typically €50. To learn more about business overdrafts click here
Invoice discounting*/commercial finance:
Invoice discounting or commercial finance allows a business to generate cash flow from actual sales. Through this mechanism the lender prepays a proportion (70% to 85%) of the business’s accounts receivable (aka trade debtors). The lending bank will typically conduct an assessment of level and quality of transactions. Once agreed, the business retains full control of the administration of the sales ledger. As more invoices are issued, more cash can be raised, resulting in an ongoing top-up loan to the business. To learn more about commercial finance click here
* Finance is provided by Bank of Ireland Finance. Bank of Ireland Finance is a registered business name of Bank of Ireland.
Please note that the provision of this product or service does not require licensing, authorisation, or registration with the Central Bank of Ireland and, as a result, it is not covered by the Central Bank’s requirements designed to protect consumers or by a statutory compensation scheme.
Business credit cards
Business credit cards are a short-term, cashflow management tool offering you control, simplicity and certainty. It allows customers to separate business and personal expenses, and put their expenses on the business card on a monthly basis and not utilise their business’ cashflow with interest-free credit for up to 37 days. There are no transaction fees when you use your credit card to pay for goods and services, making it a more cost-effective alternative. To learn more about business credit cards click here
Long-term finance options for businesses
Term loan:
This is a loan that is made by a bank to a customer, which requires the loan to be repaid in regular instalments over a set period of time. Term loans usually last between one and 10 years (three-to-five years is common) but they may last for longer periods if buying a commercial premises. Learn more about business loans or calculate what you can borrow
Credit Guarantee Scheme
Under the Credit Guarantee Scheme*, if your business has been affected by Covid-19 you can apply for a loan to fund working capital/liquidity needs, invest so your business can adapt, or refinance debt incurred as a consequence of the Covid-19 pandemic. Under this scheme businesses can access unsecured loans from €10,000 up to €250,000, while larger businesses can opt for corporate loans from €250,000 up to €1m.
* Scheme eligibility criteria will apply. All applications will undergo credit assessment and further information may be required. A guarantee premium, payable to the government, will apply.
Level of security required and rate applicable, will be determined by the amount, purpose and term of facility, in conjunction with the nature and value of the security being offered. Lending criteria and terms and conditions apply. Over 18’s only. Maximum credit of €120,000 available for online applications. Bank of Ireland cannot take responsibility for information on third party websites.
Asset finance*:
This type of finance allows a business to fund vital equipment and plant machinery. Under an agreement that typically spans three-to-five years, the bank buys the asset and leases it to the business in return for a monthly payment. At the end of the period the business can either extend the lease, trade it in or buy it outright. Learn more about asset finance here or about leasing here
A quick check-list before you apply for finance:
- Be sure you can demonstrate repayment capacity and show the bank that the business will be able to repay the money being borrowed and meet associated interest payments.
- A good business plan will give the bank the assurance it needs about the business’s ability to repay a loan.
- Involve your accountant early on so that you have realistic financial information available.
- Depending on the finance option, you may be asked to provide some form of security. If it is a limited business, directors or owners may be asked to give personal guarantees to the bank.
Next steps:
Calculate how much you can borrow
Apply for finance under the Credit Guarantee Scheme
Level of security required and rate applicable, will be determined by the amount, purpose & term of facility, in conjunction with the nature and value of the security being offered.
Lending criteria, terms and conditions apply. Over 18’s only. Bank of Ireland is regulated by the Central Bank of Ireland.
Finance is provided by Bank of Ireland Finance. Bank of Ireland Finance is a registered business name of Bank of Ireland. Please note that the provision of this product or service does not require licensing, authorisation, or registration with the Central Bank of Ireland and, as a result, it is not covered by the Central Bank’s requirements designed to protect consumers or by a statutory compensation scheme.
The Credit Provider is Bank of Ireland, trading as Bank of Ireland Finance.
Scheme eligibility criteria will apply. All applications will undergo credit assessment and further information may be required. A guarantee premium, payable to the government, will apply.
Level of security required and rate applicable, will be determined by the amount, purpose and term of facility, in conjunction with the nature and value of the security being offered. Lending criteria and terms and conditions apply. Over 18’s only. Maximum credit of €120,000 available for online applications. Bank of Ireland cannot take responsibility for information on third party websites.
